BNP Paribas, France’s largest bank, pleaded guilty to violating US economic sanctions against Iran, Sudan and other countries and agreed to pay a record $8.9 billion in penalties. The US Justice Department action against the French bank has sparked speculation that some of its rivals in Europe would also be punished. The US has focused its investigations on dollar operations of a handful of European banks with countries blacklisted by it. The probes, which began in 2009, are looking at the alleged transfer of billions of dollars to the accounts of blacklisted entities which benefited from a US legal loophole that closed in 2008. The investigations are being led by several US authorities: the justice and treasury departments, the Federal Reserve and New York’s Department of Financial Services.Pulling The PlugOrkut, Google’s first social networking site, will cease to exist after September, with the search giant deciding to shut down the service launched 10 years ago. The service, quite popular in Brazil and India, lost out to rivals like Facebook. “Over the past decade, YouTube, Blogger and Google+ have taken off, with communities springing up in every corner of the world. Because the growth of these communities has outpaced Orkut’s growth, we’ve decided to bid Orkut farewell,” Google said. Orkut was launched in 2004, the same year Facebook was founded. The latter has gone on to have 1.28 billion users.Bitter PillPharma major GlaxoSmithKline (GSK) has confirmed the existence of a sex tape of its former head in China, the latest twist in the ongoing corruption scandal it faces in the country. The secretly filmed video of Mark Reilly and his Chinese girlfriend was emailed to several senior GSK executives. Reilly has been accused of ordering his staff to bribe hospital officials to use GSK products and has been barred from leaving China. GSK said it was continuing to cooperate with the Chinese authorities. “The issues relating to our China business are very difficult and complicated,” the firm said in a statement.A Step ForwardThe US wants to restart a cyber-security working group that China shut down after the US indicted five Chinese military officers on charges of hacking into American companies’ computers to steal trade secrets. Assistant secretary of state Daniel Russel said the US was ready to resume talks, which he described as “useful and important”, if China was. Russel said officials would raise the matter at the annual US-China Security and Economic Dialogue in Beijing. After the indictments against the five officers were unsealedin May, Beijing pulled the plugon the working group.Bit By BitThe bitcoin world kicked into high gear as the US government began auctioning some of the virtual currency seized in an FBI raid on Silk Road. The US Marshals Service auction was for 29,000 bitcoins — about $17 million at current rates, although bitcoin values have been highly volatile. Bidders had to register with a deposit of $200,000 — in cash only from a bank transfer. US authorities have another wallet of over 144,000 bitcoins, which is not currently up for sale, which probably makes Washington the largest holder of the controversial cryptocurrency.In The BagMexican tycoon Carlos Slim’s real estate company Inmobiliaria Carso has bought out US telephone operator AT&T’s $5.6 billion stake in telecommunications firm America Movil. The acquisition of AT&T’s shares represent 8.27 per cent of America Movil’s capital stock, according to a company statement. “Upon consummation of the transaction authorised by the board of directors, AT&T will no longer be a shareholder of America Movil,” it stated. AT&T has gradually reduced its stake in America Movil in recent years. Last year, the American group sold more than 1.5 million shares.New WingsFast-growing Abu Dhabi carrier Etihad is spreading its wings. It has agreed to pick up a 49 per cent stake in Italian loss-making airline Alitalia. The two parties put out a brief statement which said they had agreed to “principal terms”, without disclosing any financial details. Alitalia has made an annual profit only a few times in its 68-year history. Italy’s transport minister Maurizio Lupi said Etihad, as part of the deal, is prepared to invest up to $1.7 billion over the next four years. Etihad is expected to cut up to 2,200 jobs once it takes over.Call ConnectedThe European Commission approved telecom giant Vodafone’s acquisition of Spanish cable firm Ono, ruling that the transaction posed little threat to competition. In a statement, it said the companies’ activities were “largely complementary”, with Ono’s main activity related to fixed line telecommunication services, “whereas Vodafone is active in mobile telecom”. Vodafone, flush with cash from the sale of its Verizon Wireless stake to partner Verizon for $130 billion, agreed in March to purchase Ono for $10 billion. The deal marks Vodafone’s desire to grow in Europe following last year’s €7.7-billion takeover of German cable operator Kabel Deutschland.Teaming UpDaimler and Renault Nissan will invest $1.36 billion to develop small cars and build a factory in Mexico, the companies said, in a step that deepens cooperation between the Mercedes and Infiniti brands. The companies said they will build a plant with a capacity of 300,000 vehicles in Aguascalientes, Mexico. The first Infiniti cars will roll out of the new plant in 2017, followed a year later by Mercedes, with both brands planning to market those vehicles globally. Nissan, Mercedes and alliance partner Renault have shared engines, plants and vehicle underpinnings for small cars since Daimler CEO Dieter Zetsche and Renault Nissan boss Carlos Ghosn forged an alliance in 2010.Thumbs UpEuropean regulators have recommended approval of a copycat insulin for diabetics, posing a threat to French drugmaker Sanofi whose top-selling Lantus is now set to face a cheaper rival in 2015. The new drug, Abasria, is made by US rival Eli Lilly, which has developed it as a so-called biosimilar version of Sanofi’s $8 billion-a-year Lantus, or insulin glargine. The green light from the European Medicine Agency for Lilly and its partner Boehringer Ingelheim marks another step forward for biosimilar medicines, which are copies of biotech drugs that promise to cut the cost of treatment. Industry analysts expect Lilly’s version of insulin glargine to be priced significantly lower than Lantus, to attract patients and healthcare providers.(This story was published in BW | Businessworld Issue Dated 28-07-2014)
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The strategic importance of India’s realty sector as an engine of growth cannot be emphasided more. Playing a central role in the development of the country’s infrastructure base, the real estate sector is one of the largest generators of economic activity. With multiple cross-linkages across various industries like cement, steel, chemicals, IT/ITeS, manufacturing and retail, the real estate sector is at the core of the construction industry and is a conduit for private sector participation in India’s built environment. Within the realty sector, the housing segment offers the greatest potential and opportunity. A recent report by the Confederation of Real Estate Developers’ Association of India (CREDAI) titled “Assessing the Economic Impact of India's Real Estate Sector 2013-14” documents that the real estate sector had a total supply pipeline of close to 3.6 billion sq. ft. lined up for completion in 2013. About 98 per cent of this is concentrated in residential segment, including organised as well as unorganised space. The rest includes organised commercial office and retail space in Tier-I and some Tier-II cities.The total economic footprint generated by the construction of this real estate pipeline can be gauged from the fact that it will require a total investment of about INR 254,000 crore, which will help generate revenues worth INR 370,000 crore, and provide employment to about 7.6 million people across the country. Persistent Woes There are pertinent and long prevailing issues ailing India’s real estate sector. Despite repeated petitioning to the central government, the sector has not been accorded the status of an “industry”, consequently affecting the sector’s ability to access debt lending at better interest rates and reduced collateral values. Swelling cost of construction, higher cost of finance due to delay in approvals, lack of availability of serviced urban lands, absence of single window approval system, slow reforms and dawdling pace of growth in infrastructure are some of the other significant issues curtailing growth of the sector.Unlocking the PotentialThe three major promises made by the National Democratic Alliance (NDA) in their manifesto having direct implications for the real estate sector include (i) development of 100 new cities; (ii) implementing a new land use policy; and (iii) planning for low-cost housing. Prime Minister Modi’s pledge to ensure ‘Housing for All’ by 2022 presents anINR 9 lakh crore opportunity for the sector.Budget 2014-15 holds the key to unlocking this opportunity for India’s real estate sector. Key issues that await government attention are the following: Conferment of “Industry” status, at least to the Housing Segment:Both from a developer’s and a consumer’s perspective, there is merit in according real estate sector with the official recognition of being an industry. It is imperative for the sector to be recognised as a priority sector and ensure easy access to much needed finance, bring down prices and kick start the economy. Even if industry status for real estate is not conferred, housing segment should be given that status. This necessity needs to be addressed particularly in pursuit of lowering the national housing deficit. Further, while 100 per cent FDI is permitted in the real estate sector subject to certain norms, the inflows have been limited. The conferment of the special status will give the sector the identity of an organised sector and assure investors in the international markets, paving the way for greater FDI inflows, easy sanction of loans for projects and stabilisation of interest rates. Single Window Clearance Mechanism: One of the major needs of the hour is the single-window clearance system for project approvals, especially for the housing segment in order to curb the ongoing delays in project sanctioning. Currently, this process is very tedious and takes 1-3 years, affecting the timelines and scheduling of the projects. Moreover, there is no transparency in the system. A single-window clearance would help to speed up the approval process thus boosting the sector in the long run.Tax Appropriations: There is great optimism associated with the establishment of the new government in impacting real estate pricing. Further, reduction in interest rates on home loans, implementation of the proposed GST framework and the implied tax benefits to buyers are other expectations that will augur well for the sector. Going forward, taxes on under-construction properties must be reduced as it will help first home buyers. Service tax, sales tax and VAT on built-up etc. are other chargesapplied during the construction of the project whereas completed properties only attract registration charges. The budget presents an opportunity to offer some benefits for buyers opting for under-construction properties, which will accelerate the demand-supply cycle. Presently, the only benefit that the customers get is the option of staggered payment.Moreover, the current income tax benefits on deduction of interest on housing loans are considered inadequate. Upward revision in interest rate on home loan deduction limit and reintroduction of standard deduction are some of the key requirements to provide an impetus to the real estate sector.Reduction in Repo-Rate: While the RBI’s continuous increase in repo rate is being done to keep inflation under control, it is adversely impacting the real estate sector as EMIs are steadily rising. Reduction of repo rates will, in turn, lead to reduction in rate of interest on home loans. Reduction of home loan interest rates would encourage more people to go for loans, fueling demand and supply in the sector. REITs: Real Estate Investment Trusts (REITs) could have a significant positive impact on the sector by providing a new funding avenue to developers,reducing exposure of Indian banking system to the sector and providing a productive investment avenue for channeling household savings. To kickstart REITs in India, the government should look to announcing favorable tax provisions relating to taxability of stakeholders in a in the upcoming budget. Affordable Housing: The new government has announced a clear mandate in terms of ‘housing for all’, and will therefore need to come up with a detailed affordable housing policy. However, to tackle the massive housing requirement of urban India in an effective and speedy manner, the new housing policy should look to suggest some viable methods for making affordable housing possible in public-private partnership (PPP) mode.The government also needs to look into providing additional incentives such as tax concessions and more income tax relief to buyers of affordable housing units. Developers of affordable housing can also be incentivised in various ways, such as income tax deduction, reducing duties. Government should consider providing specific tax holiday benefits for affordable housing projects like 80IA to provide further impetus to the sector. While the government had taken a commendable step by allowing External Commercial Borrowings (ECB’s) for affordable housing, easing norms for the same will allow for greater access. FDI in Real Estate: The industry looks forward to the announcement of progressive policies pertaining to FDI in real estate, since the sector is in marked need of a more liberalised funding flow. Lock-in requirements for foreign players and stringent exit clauses have had a dampening effect on FDI in the sector.Sustainable Growth:The Union Budget should incentivise adoption of sustainable technologies like rain-water harvesting, zero liquid discharge and solar installations for housing projects. Currently, the incentives being offered are not consistent across all States, and in States where they exist, the implementation mechanism is yet not aligned to the expected output. From a developer’s perspective, there are limited incentives for enabling green initiatives. There is a need for proactive efforts, such as providing extra FSI for projects that incorporate green initiatives and property tax rebates for green developments on a large scale in this Budget announcement. This will enable increased focus of the sector on its environmental responsibility and incentivise development of eco-friendly, green infrastructure. With the twin objectives of spurring growth in India’s realty development and benefitting the end-consumer, expectations of some policy improvements from the upcoming budget are high. To re-establish the country as an economic force and boost consumer and investor confidence,the real estate sector is hoping for the announcement of new progressive policies pertaining to some of the issues of immediate concern. Real estate sector has been at the forefront of the Indian Government’s agenda due to its potential to propel economic growth significantly. Hence, it is imperative that this sector gets due weightage in the upcoming budget for the policies and incentives that aid its development.Budget 2014-15 is being watched, closely.(The suthor, Brotin Banerjee, is MD & CEO, Tata Housing Development Company Limited)
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Indian Finance Minister Arun Jaitley on Monday (7 July) blamed the recent hike in rail fares on decisions taken under the previous UPA regime and said that the BJP-led government should be judged from what is presented on Tuesday (8 July) as part of its railway budget."The fair hike which has happened is your (UPA's) legacy.Whether we hike it or not, you will get to know tomorrow," Jaitley said while addressing the Congress benches in Rajya Sabha during a discussion on price rise.Railways recently implemented a 14.2 per cent hike in passenger fares along with a 6.5 per cent raise in freight charges.Jaitley said there was a need to understand the situation in which the UPA dispensation had left railways. A major allegation against UPA, Jaitley said, is that it eschewed hard decisions even when those were in the public interest, leading to the present state of affairs.He said that in February this year, the losses incurred by railways on the basis of passenger fares alone touched Rs 30,000 crore.Jaitley claimed that as the losses got so inflated by February that they threatened to bring things to a standstill, the then rail minister approached the government with a proposal to hike fares on February 6. And, on February 11, the then Prime Minister agreed to the rise in rail fares, he said."At the Prime Minister's suggestion, it was decided to implement the fare and freight revision with effect from the first week of May, 2014," Jaitley added.He said that as there was a feeling the parliamentary polls would be over by May, the proposal that was cleared was for raising the fares only after that exercise.On May 16, as the results were being announced, Indian Railway Board issued a notification giving effect to the then Prime Minister's direction. "The fares were implemented. By evening the (then) minister knew that his government was going. At 7 in the evening, having approved the tariff hike in February itself to be given effect in May, the outgoing minister passed another order saying 'what you have done in the afternoon should be rescinded and this matter should be decided by the next minister'," Jaitley said.The Finance Minister said that the present rail minister Sadananda Gowda was faced with a Hobson's choice."Should he (Gowda) allow the railways to continue to bleed and then hide behind some fact and say 'I won't raise the fare' and we reach a situation few months down the road that railways are unable to operate," he said.He said that the question was whether the new Rail Minister would follow the "weak-kneed" policy of his predecessors that unpopular decisions cannot be taken even if they are in the national interest or if he would take his decision and place the fact before the country that, to run the railways, it was necessary.(PTI)
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The rupee on Tuesday (8 July) recovered by 8 paise to 59.93 against the US in early trade at the Interbank Foreign Exchange market on increased selling of the American currency by exporters.Besides, strengthening of the euro and yen against the dollar in overseas market and a higher opening in the domestic equity market also supported the rupee, forex dealers said.The rupee had lost 29 paise, its biggest drop in nearly three weeks, to close at 60.01 against the dollar Monday (7 July) on rising demand for the US currency from custodian banks.Meanwhile, the benchmark BSE Sensex rose by 90.36 points, or 0.34 per cent, to trade at a new record high of 26,190.44 in opening trade Tuesday.(PTI)
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India, the world's biggest sugar consumer, raised the import duty on the sweetener to 25 per cent from 15 per cent as part of efforts to help regional mills struggling with lower prices and higher stocks.A rise in the duty will make imports unviable for port-based refiners despite a plunge in global prices due to ample supplies from top exporters Brazil and Thailand.In June, Food Minister Ram Vilas Paswan had said the import duty could be raised to 40 percent from 15 percent if mills pay farmers' dues, estimated at nearly 50 billion rupees.Mills say a 70-per cent jump in the price that they have to pay to farmers in the biggest cane-growing state of Uttar Pradesh and a meagre 7 per cent rise in sugar prices have worsened their finances, leading to cane dues."There was an import parity but mills were not signing deals, expecting revision in the import duty. At 25 percent duty, imports are not viable," said a Mumbai-based dealer with a global trading firm.In the current sugar year to September, India is likely to import just 30,000 tonnes compared with 680,000 tonnes a year earlier, an industry official told Reuters earlier this month.The benchmark sugar futures in India rose 1 per cent after the increase in the duty, while shares of sugar makers such as Bajaj Hindusthan Ltd, Shree Renuka Sugars Ltd and Balrampur Chini Mills Ltd rose more than 4 percent."The duty will certainly support prices, but local prices are unlikely to jump. Supplies are adequate," said Ashok Jain, president of the Bombay Sugar Merchants Association.Prices in India, the world's biggest producer after Brazil, fell below the cost of production in some states as the south Asian country produced surplus sugar for the four straight year.Even in the next year starting October, the country's output is likely to jump 4 per cent to 25.3 million tonnes because of higher cane yields in Maharashtra and Karnataka.Indians consume around 23 million tonnes of sugar annually.(Reuters)
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The newly elected government would be presenting the Finance budget on July 10. While India Inc expects a budget to be growth oriented and one which is able to boost India’s image as attractive investment destination, striking a balance between fiscal deficit and investment friendly reforms may not be a cakewalk for the Government. From an investor perspective, the key issue to address in this budget is to resurrect the Investors’ perception about India as an investment destination. The approach of tax authorities and the retrospective amendments in the tax laws over past couple of years have dampened the foreign investor’s confidence. Making these amendments prospective would help in restoring the investor confidence.Some of the other wish list items on the tax front which could be considered in this budget are discussed below:The rise in domestic withholding tax rates on payment of fees for technical services and royalties to non-residents from 10 per cent to 25 per cent last year has hit the Indian industry hard and is detrimental to the economy as India needs to import world class technology and tax treaties do not come to the rescue in many cases. The Government will do well if the rate is restored back to 10 per cent. There is a lot of thrust on the development of infrastructure sector. Substantial investments are required to be made in this sector with a long gestation period. Per the legal requirements most infrastructure activity is carried on in a Special Purpose Vehicle (SPV) floated specifically for that purpose. The SPV incurs losses in the gestation period whereas the Parent entity would typically earn business profits and pay tax thereon. Introduction of tax consolidation in these cases will lower the burden of taxes on these entities which are contributing to a national goal of infrastructure development by allowing offset of losses incurred by the infrastructure vehicles against the profits earned by the businesses.On the outbound investment front, a reduced rate of 15% was prescribed for taxing foreign dividends received by an Indian company, where it holds atleast 26% of the equity share capital. This reduced tax rate was to incentivize Indian companies to repatriate the income earned overseas back to India and was available till end of the financial year 2013-14. In line with international practice, providing exemption on dividends received from overseas entities or providing credit for the underlying taxes paid by the overseas operating entity may be considered. Alternatively, the concessional tax rate of 15% should be extended. The new corporate law permits outbound merger of an Indian entity with a foreign entity. This provision is yet to be notified. However, the tax laws are still not aligned to determine the taxability of such cross border mergers. Appropriate provisions could be enacted to remove ambiguities.The jury is still out on the need for enacting the proposed Direct Taxes Code (DTC). However, it would be helpful to clear the uncertainty surrounding its enactment over the last few years. Finally, all good polices are ineffective without good implementation. The Tax Policy Reforms Commission (‘TARC’) under the Chairmanship of Dr. Parthasarathi Shome has recently submitted its First Report (‘Report’). According to the Report, taxpayer services must comprise the first focus of a tax administration and prominence be given to “customer focus” to improve the experience of taxpayers with the tax department. The Report makes several key recommendations in the areas of existing organisational structure, existing business processes, existing mechanism for dispute resolution and taxpayer services and taxpayer education which highlight the underlying need to fundamentally reform the tax administration. In conclusion, the intention of this Government could be judged not by the concessions and sops it doles out to the industry and foreign investors but by its ability to boost taxpayer confidence and the level of tax administrative reforms to improve the taxpayer’s experience. The authors are Jatin P. Kanabar, Director and Pushkar A. Khire, Senior Manager, Deloitte Haskins & Sells LLP.
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The rupee is trading at 60.52/53 versus the dollar after hitting 60.49, its highest since July 31 and higher than Thursday's close of 60.67/68. The pair is seen in a range of 60.40 to 60.80 during the session.Traders to monitor debt market flows after foreign funds bought $2.65 billion in a single session on Wednesday.The index of dollar versus six majors is marginally lower.Asian shares rise in early trading after upbeat US data sparked another record close on Wall Street.Local shares to be watched for cues on fund flows. The Nifty rises 0.4 per cent in early trade.(Reuters)
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US-based economist Arvind Subramanian is poised to be named as chief economic adviser to Prime Minister Narendra Modi's government, two sources at the finance ministry said on Friday.If confirmed, the appointment would bring in a second economist of international renown to a key policy post following the naming of former International Monetary Fund chief economist Raghuram Rajan as central bank chief last year.The appointment of Subramanian, a senior fellow at the Peterson Institute for International Economics, was recommended by Finance Minister Arun Jaitley. Cabinet-level approval is expected to follow."He is likely to be appointed soon," one of the sources said.Modi stormed to a general election victory in May with a pledge to lift the economy out of its worst slowdown in a quarter of a century and put to work the one million young people who enter the workforce each month.The nationalist leader has abolished a Soviet-style Planning Commission, but made an otherwise slow start on economic reforms, disappointing some supporters who had hoped that he would take decisive action to promote a recovery.(Reuters)
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